Task: The Garden Avenue Seven sells tapes of its musical performances. The following data shows sales for the past 18 months. The group's manager wants an accurate method for forecasting future sales.
Month Sales Month Sales Month Sales
1 293 7 381 13 549
2 283 8 431 14 544
3 322 9 424 15 601
4 355 10 433 16 587
5 346 11 470 17 644
6 379 12 481 18 660
Forecast the sales for month 19 and compute the MSE and MAD assuming:
1) A 3 months moving average
2) A 4 months weighted moving average, assuming a weight of 0.4 for the most recent period, 0.3 for the next period back, 0.2 for the third period back, and 0.1 for the fourth period back.
3) An exponential smoothing with alpha = 0.3 and 0.5. Which value of alpha provides the best forecast?
4) A trend line projection
5) Which method of forecasting would you recommend to the manager? Why?